Menlo Ventures Backs AI Coding Startup Factory in $5B Round

Menlo Ventures partner Matt Murphy and his team announced via a blog post on Monday that the firm has invested in AI coding startup Factory. Menlo declined to disclose the investment amount but confirmed the deal is part of Factory's latest funding round, which was announced last month at a $5 billion valuation.

A source familiar with the deal said the investment is significant for Menlo and not a token gesture, adding that Menlo would have invested more had there been room on the cap table. The public endorsement comes at a sensitive time for Factory, which has been embroiled in a very public dispute in recent weeks.

Factory co-founder and CEO Matan Grinberg had alleged that he fired board advisor Chris Degnan over concerns that Degnan may have shared confidential information with competitor Cognition. Degnan disputed the account, saying he resigned. Vinod Khosla, whose firm backs both Factory and Cognition, publicly called Factory a "struggling second tier competitor" and accused Grinberg of lying. Menlo's full-throated endorsement, which praised Factory's founders, technology and customer relationships, is widely seen as a statement that Factory is not in the state Khosla implied.

Notably, Menlo is not an investor in competitor Cognition. Murphy previously bet his firm on Anthropic and has since backed deals including Lovable and Legora.